How Drop Shipping Works
The age of Internet technology has given birth to a new way of doing business as a venture dealing with the supply and demand market. One of these business operation innovations is called drop shipping. Though as seen in the superficial level, drop shipping offers no different look in delivering the products to the consumers.
But behind the scenes where storage and delivery is concerned, drop shipping is revolutionizing the way businesses do their business.
The age of Internet technology has spurt the growth of how businesses transact their ventures and in the process has created a revolution in how a product is sold to the consumers. One of these major innovations in delivering the product to the end users is what is called drop shipping. Though in a superficial cursory look on how consumers get their product seems no different from the old traditional way, drop shipping works behind the scene and those who are active in online businesses are the only one familiar with it. Nevertheless, this businesses operational innovation has helped many online sellers see profit without touching the product they are selling.
So how this could have happened in the business structure of drop shipping? This operational strategy can be easily explained as the ongoing revolution in business brought by the Internet technology.
How It Works
Drop shipping works in a rather segregated or role functioning acted by the manufacturer and the retailer and the consumer (end user). In the traditional business structure, the retailer will order products from the wholesaler or the manufacturer and is obliged to store the products in its own warehouse. The retailer then has the function to market and advertise the product and when another retailer or an end user orders from it, it gets its supply from its own inventory.
In drop shipping strategy, the wholesaler has the function to create the product and store it for itself. The retailer of the product does not have to get the product from the wholesaler or the manufacturer but is focused only in the marketing strategy and advertising of the product. When an order comes from a consumer or another retailer, the original retailer only has to get the necessary information from the consumer and then forward it to the wholesaler. The wholesaler then is the one responsible in the shipping and delivery of the product. In this kind of business transaction, the original retailer obviously does not have to store the product but the wholesaler. The retailer pays the wholesaler a fee for every ship and then sees a profit as it sells products, usually online.
Advantage and Disadvantage
There are of course advantages and disadvantages in this kind of scheme. First and foremost, the retailer does not need a warehouse to store the product. The disadvantage comes only that the retailer has no ability to check whether the product is of quality since the manufacturer does the storing and delivery of the product.
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